HEALTHY EXTRACTS INC. - Quarter Report: 2024 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code ()

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the previous 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
	☐	Smaller reporting company
(Do not check if a smaller reporting company)		Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of August 14, 2024, there were shares of common stock, $0.001 par value, issued and outstanding.

HEALTHY EXTRACTS INC.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION

`Item 1.`Financial Statements	1
`Item 2.`Management's Discussion and Analysis of Financial Condition and Results of Operations	25
`Item 3.`Quantitative and Qualitative Disclosure About Market Risks	29
`Item 4.`Controls and Procedures	29

PART II – OTHER INFORMATION

`Item 1.`Legal Proceedings	31
Item 1A. Risk Factors	31
`Item 2.`Unregistered Sales of Equity Securities and Use of Proceeds	31
`Item 3.`Defaults Upon Senior Securities	31
`Item 4.`Mine Safety Disclosures	31
`Item 5.`Other Information	31
`Item 6.`Exhibits	32

SIGNATURES	33

PART I – FINANCIAL INFORMATION

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1Financial Statements

HEALTHY EXTRACTS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 AND DECEMBER 31, 2023
(Unaudited)


		JUNE 30	DECEMBER 31,
		2024	2023
ASSETS


CURRENT ASSETS
Cash		`$`	`$`
Accounts receivable
Inventory, net
Offering costs
Right of use asset, net
	Total current assets

Fixed assets
Patents/Trademarks
Deposit
Goodwill
	Total other assets

TOTAL ASSETS		`$`	`$`


LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accounts payable		`$`	`$`
Accrued liabilities
Lease liabilities - current
Lease liabilities - long-term
Notes payable
Notes payable - related party
Convertible debt, net of discount
Accrued interest payable
Accrued interest payable - related party
Derivative liabilities
	Total current and total liabilities


STOCKHOLDERS' EQUITY
Preferred stock, $ par value, shares authorized, none and shares issued and outstanding, respectively
Common stock, $ par value, shares authorized, shares issued and outstanding as of June 30, 2024, and shares issued and outstanding as of December 31, 2023, respectively
Additional paid-in capital
Accumulated deficit		`()`	`()`
	Total stockholders' equity

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		`$`	`$`


The accompanying notes are an integral part of these unaudited consolidated financial statements.

HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDING JUNE 30, 2024 AND 2023

(Unaudited)

FOR THE 3 MONTH ENDING

FOR THE SIX MONTHS ENDING

JUNE 30

2024

2023

2024

2023

REVENUE

Revenue

$

Net revenue

COST OF REVENUE

Cost of goods sold

Total cost of revenue

GROSS PROFIT

OPERATING EXPENSES

General and administrative

Total operating expenses

OTHER INCOME (EXPENSE)

Interest expense, net of interest income

()

Change in fair value on derivative

()

Total other income (expense)

()

Net income/(loss) before income tax provision

()

NET INCOME/(LOSS)

$

$()

Income/(Loss) per share - basic and diluted

$

$()

Weighted average number of shares outstanding - basic and diluted

The accompanying notes are an integral part of these unaudited consolidated financial statements.

HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE SIX MONTHS ENDING JUNE 30, 2024 AND 2023

(Unaudited)

Common Stock

Paid-In

Accumulated

Shares

Amount

Capital

Deficit

Total

Issuance of common stock for services

Fair value of restricted stock units

Fair value of options and warrants issued

Issuance of common stock-restricted stock units issued

Net (loss) for the period

()

Balance - June 30, 2023

()

Issuance of common stock for services

Fractional shares adjustment from reverse split

()

Fair value of options and warrants issued

Issuance of common stock-restricted stock units issued

Net (loss) for the period

()

Balance - June 30, 2024

()

The accompanying notes are an integral part of these financial statements.

HEALTHY EXTRACTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)


	FOR THE SIX MONTH ENDING
	JUNE 30
	2024	2023
Cash Flows from Operating Activities:
Net Income/(Loss)	`$()`	`$()`

Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization	`()`
Warrants issued for services
Change in fair value on derivative liability
Changes in operating assets and liabilities:
Accounts receivable	`()`	`()`
Inventory
Offering Costs
Cost in acquisition of Hyperion/OP&M		`()`
Right of use asset, net		`()`
Note receivable		`()`
Accounts payable	`()`
Accrued liabilities	`()`	`()`
Accrued interest payable	`()`
Accrued interest payable - related party
Lease liability - current	`()`
Lease liability - long-term	`()`
Net Cash used in Operating Activities		`()`

Cash Flows from Investing Activities:

Purchase of fixed assets
Gain on sale of asset
Cash flows provided by (used in) Investing Activities:

Cash Flows from Financing Activities:

Proceeds from issuance of common stock	`()`
Proceeds from issuance of convertible debt
Payments for repayment of convertible debt		`()`
Proceeds from issuance of noted payable
Payments for repayment of notes payable	`()`	`()`
Proceeds from issuance of noted payable - related party
Payments for repayment of noted payable - related party
Loan origination fees
Net Cash provided by Financing Activities	`()`

Increase (decrease) in cash
Cash at beginning of period
Cash at end of period	`$`	`$`


The accompanying notes are an integral part of these unaudited consolidated financial statements.

HEALTHY EXTRACTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024 and 2023

and $. The following are the classes held in inventory as of June 30, 2024 and December 31, 2023:

Finished Goods

Work in process

Total inventory

Inventory allowance

()

Total inventory, net

in patents to its balance sheet.

As of June 30, 2024, the Company believes that based upon qualitative factors, no impairment of indefinite-lived intangible assets is necessary.

Derivative liability

Fair Value at December 31, 2023

Derivative liability

Fair Value at June 30, 2024

June 30, 2024

Level 1

Level 2

Level 3

Total

Derivative liability

-

December 31, 2023

Level 1

Level 2

Level 3

Total

Derivative liability

-

The details of derivative liability transactions for the six months ended June 30, 2024 and the year ended December 31, 2023 are as follows:

Issued during the year ended December 31, 2023

Derivative liabilities debt premium

Change in fair value recognized in operations

()

Converted during the year ended December 31, 2023

()

Balance, December 31, 2023

$

Issued during the six months ended June 30, 2024

Derivative liabilities debt discount

Change in fair value recognized in operations

Converted during the six months ended June 30, 2024

Balance, June 30, 2024

$

The Company did not transfer any assets or liabilities measured at fair value on a recurring basis between levels during the months ending June 30, 2024 and the year ended December 31, 2023.

The Company determines the fair value of the derivative liability based on Level 3 inputs using the Black-Scholes option pricing model. The significant unobservable input assumptions that can significantly change the fair value includes common share price; amount of principal and accrued interest convertible into shares as of the conversion date, and the number of shares issuable upon conversion; expected exercise price; expected term; volatility; and risk-free interest rate.

of convertible debt.

. Due to our negative cash flow, the Company has substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. In addition, the Company’s development activities since inception have been financially sustained through equity financing. Management plans to keep seeking funding through debt and equity financing which are intended to mitigate the conditions that have raise substantial doubt about the entity’s ability to continue as a going concern.

and $ respectively, to an officer and director for salaries, which is included in general and administrative expenses on the accompanying consolidated statement of operations.

$

Unsecured debt H

September 1, 2023

January 1, 2024

$

Unsecured debt I

January 1, 2024

June 30, 2025

$

Total notes payable

$

Debt discount and deferred financing costs

-

Total notes payable, net

$

Unsecured debt A: On March 2, 2020, the Company received an unsecured loan of $200 from a shareholder. Additionally, during in March and June 2019, the Company received an additional loan of $666 from another shareholder. Both of these notes are unsecured and do not have a payment due date at an interest rate of 0.00%.

Unsecured debt H: On September 1, 2023, the Company received an unsecured line of credit in the principal of up to $82,500 with a loan origination fee in the amount of $7,500, which was amortized over the life of the line of credit. The net proceeds from this line of credit were $75,000. The loan is unsecured and is due for repayment on January 1, 2024. Interest will accrue at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the holder of the note can declare all or any portion of the unpaid balance with all accrued interest immediately due and payable. On January 1, 2024, both parties agreed to convert this note and move it over to

. For the next 24 months of the lease, the average monthly base rent will be approximately $. As part of the agreement the Company will be responsible to share any property operating expenses estimated as $1,017 per month. Pursuant to ASC 842, the estimated operating expenses was included with the base rent and was included in the calculations of the right of use assets. The Company recorded operating lease right-of-use of $175,765 and lease liabilities for operating lease of $175,765.

Weighted average remaining lease term – operating leases (in years)

Average discount rate – operating leases

June 30, 2024

Operating leases

Right-of-use assets, net of amortization of $134,688

Short-term operating lease liabilities

()

Long-term operating lease liabilities

Total operating lease liabilities

()

The following table summarizes the future undiscounted cash payments reconciled to the lease liability:

Year Ending		Operating Leases
2022 (remaining eleven months)		$
2023
2024
2025
2026 and thereafter
Total lease payments		$
Less: Imputed interest/present value discount		$
Present value of lease liabilities		$

Secured debt C

October 7, 2022

October 7, 2023

Unsecured debt D

March 20, 2023

August 17, 2024

Secured debt E

May 19, 2023

May 18, 2024

Secured debt F

July 26, 2023

May 18, 2024

Secured debt G

December 19, 2023

December 18, 2024

Unsecured debt J

March 18, 2024

May 25, 2025

Secured debt K

April 15, 2024

October 15, 2025

Total notes payable

$

Debt discount and deferred financing costs

-

Total notes payable, net

$

Unsecured debt B: On February 22, 2022, the Company received an unsecured loan in the principal of $200,000 with a loan origination fee in the amount of $20,000, which was fully expensed as interest expense in this period. The net proceeds from this loan were $180,000. The loan is unsecured and the initial payment of $17,804 was due on April 22, 2022. There will be ten monthly payments due on the 22nd day of each following month, beginning on May 22, 2022 through Feb 15, 2023. During fourth quarter of 2022, the note holder agreed to forgo two months of payments and add them to the back end of the note, which extended the due date of the note to April 25, 2023. Interest will accrue at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the default interest will increase to 16% per annum. During 2022, the Company made a total in principal payments of $124,630 towards unsecured debt B. During 2023, the Company has made additional principal payments towards unsecured debt B totaling $75,370 which settled the entire principal balance in full. As of June 30, 2024, the principal balance of the note was paid off.

Secured debt C: On October 7, 2022, the Company agreed to a secured loan by any consigned inventory held at fulfillment centers and any rights, title or interest in their account. The principal loan amount was $200,000 and will have a loan term of twelve months with an annual interest rate of 12.99%, with a default rate of 14.99%. The first three months of payment will be interest only payments of $2,165 and the remaining nine payments will be principal and interest payments of $23,442. Interest payments will begin November 8, 2022 and Installment payments, including principal and interest, will begin February 8, 2023. During 2023, the Company has made principal payments totaling $200,000 towards the secured debt C which settled the entire principal balance in full. As of June 30, 2024 the principal balance of secured debt C was paid off.

Unsecured debt D: On March 20, 2023, the Company received an unsecured loan in the principal of $330,000 with a loan origination fee in the amount of $30,000, which was fully expensed as interest expense in this period. The net proceeds from this loan were $300,000. The loan is unsecured and the initial payment of $23,359 will be due on June 17, 2023. There will be fourteen monthly payments due on the 17th day of each following month, beginning on July 17, 2023 through August 17, 2024. Interest will accrue at an interest rate of 10% per annum on any unpaid principal

Convertible promissory note #2

May 25, 2022

August 5, 2023

Convertible promissory note #3

May 12, 2022

May 1, 2023

Convertible promissory note #4

January 24, 2023

April 24, 2024

Total notes payable

Debt discount and deferred financing costs

-

Total notes payable, net

Convertible promissory note #1:

On July 28, 2016, the Company executed the convertible promissory note #1 in the principal amount of $15,000, which is in default but management has not been able to make contact with this party, due to them living out of the country. The due date for this note was January 19, 2017 at an interest rate of 8%, with a default interest rate of 18%. We have calculated the derivative liability as if it is in default (but the note’s default interest rate stays the same at 8%) and will still accrue appropriate interest until the note is fully satisfied or converted into the Company’s common stock. The conversion option for this note coverts at a 54% discount to the market price based on the lowest trading prices in the last 20 days trading period. The outstanding balance on convertible promissory note #1 as of June 30, 2024 was $6,750.

The fair value of the derivative as of June 30, 2024 was determined to be $36,866 using the Black-Scholes option pricing model based on the following assumptions: common share price of $2.47 per share; expected exercise price of $1.3832 per share; volatility of 230%; expected dividend yield of zero; and annual risk-free interest rate of 5.37%. The derivatives are classified as liabilities as they represent an obligation to deliver a variable number of shares of common stock in the future and are therefore required to be initially and subsequently measured at fair value each reporting period. The Company originally recorded a derivative liability in the amount of $9,649. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative.

Convertible promissory note #2:

On May 25, 2022, the Company executed the convertible promissory note #2 in the principal amount of $154,000 with a loan origination fee in the amount of $15,400, which was fully expensed as interest expense in this period. The net proceeds from this note were $138,600. The loan is unsecured and the initial repayment of $14,488 was due on October 5, 2022. There will be ten additional monthly payments due on the 5th day of each following month, beginning on November 5, 2022 through August 5, 2023. Interest will accrual at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the default interest will increase to 16% per annum. During 2022, the Company has made principal payments totaling $43,465 towards the outstanding balance on convertible promissory note #2. During 2023, the Company has made additional principal payments towards convertible promissory note #2 totaling $110,535 which settled the entire principal balance in full. As of June 30, 2024, the principal balance of the note was paid off the principal balance of the note was paid off.

. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative.

$

Exercise Price

$-

$

$-

$

Expected Life

Volatility

%

Dividend Yield

%

Risk-Free Interest Rate

%

Convertible Notes

Total Fair Value

$

The expected life of the note was based on the remaining contractual term of the instruments. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank.

Consolidated Statement of Operations – Change in fair value on derivative

During the year ended December 31, 2023, the following transactions were recorded in the account “change in fair value on derivative”: (i) as a result of the issuance of convertible notes, the Company recorded derivative liabilities of $(); (ii) the Company viewed the convertible debt derivatives as short term and thus chose to expense the debt discounts associated with the derivative liabilities incurred during this period in the amount of $(29,167); (iii) the changes in the fair value of these derivative liabilities for the year ended December 31, 2023 resulted in a gain of $; and (iv) the Company recorded a gain on debt extinguishment of $ to account for the extinguishment of derivative liabilities associated with the settlement or the conversion of the convertible debt accounted for as a derivative liability.

During the three months ended June 30, 2024, the following transactions were recorded in the account “change in fair value on derivative”: (i) the change in the fair value of these derivative liabilities for the three months ended June 30, 2024 resulted in a loss of $.

Issued during the year ended December 31, 2023

Derivative liabilities debt discount

Change in fair value recognized in operations

()

Converted during the year ended December 31, 2023

()

Balance, December 31, 2023

$

Issued during the six months ended June 30, 2024

Derivative liabilities debt discount

Change in fair value recognized in operations

Converted during the six months ended June 30, 2024

Balance, June 30, 2024

$

$()

Change in valuation allowance

()

$

The components of the deferred tax assets and liabilities at June 30, 2024 and 2023 are as follows:

$

Valuation allowance

()

Net long-term deferred tax assets

$

common shares with a par value of $ per share. Each common share entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought. During February 2017, the Company increased the authorized number of shares to . Also, the Company increased the authorized preferred stock to shares and designated shares of preferred stock to Series A Convertible Preferred Stock. During January 2018, the Company increased its authorized number of common shares to . During April 2018, the Company increased its authorized number of common shares to . The Board of Directors, in the future, has the authority to increase the authorized capital up to 4,000,000,000 shares based on shareholder approval. On December 29, 2023 the Company decreased its authorized number of common shares to .

. Due to the reverse stock split we added 9,802 common stock shares from the fractional shares issued by the DTC.

On October 16, 2017, the Company filed an Amended and Restated Certificate of Designation of the Rights, Preferences, Privileges and Restrictions of the Series A Convertible Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Nevada. The Amended Certificate reduces the number of preferred shares designated as Series A Preferred Stock from shares to shares. The Amended Certificate also changes the conversion and voting rights of the Series A Preferred Stock. The Series A Preferred Stock is now

outstanding shares of preferred stock. All the preferred stock was converted in common stock on February 4, 2019.

Common Share Issuances

There were no shares issued during the first quarter 2024. During the three months ended June 30, 2024, the Company issued shares of common stock for services. 4,166 shares were issued at $6.00 per share while 25,500 shares were issued at $2.20 per share.

During the three months ended March 31, 2023, the Company issued shares of common stock for services. These shares were issued at a per share price of $0.05. During the three months ended June 30, 2023, the Company did not issue any shares of common stock. During the three months ended September 30, 2023, the Company issued 9,000,000 shares of common stock for the Restricted Stock Units which were executed. The holders paid the Company $0.01 for each share of common stock and the value of each share was $0.05. There were no shares issued during the fourth quarter 2023.

Warrant Issuances

During the three months ending March 31, 2023, the Company issued warrants to 2 unrelated parties at a per share price of $5.6592. On February 2, 2022, the Company issued warrants to an individual at a per share price of $6.00. As of December 31, 2023, there were warrants outstanding, of which warrants are fully vested. As of June 30, 2024, there were warrants outstanding, of which warrants are fully vested.

$

Granted

Forfeited

()

-

Exercised

-

Outstanding at June 30, 2024

$

Vested and expected to vest at June 30, 2024

$

Exercisable at June 30, 2024

$

At June 30, 2024, the intrinsic value of these stock warrants was $0 as the exercise price of these stock warrants were greater than the market price.

shares of common stock were issued to the Preferred Holders. The Preferred Holders agreed to convert each share of Series A Convertible Preferred Stock into eighteen (18) shares of common stock and agreed to retire a total of shares of Series A Convertible Preferred Stock. The Company cancelled the retired shares.

Omnibus Stock Grant and Option Plan

$

Granted

Forfeited

-

Exercised

-

Outstanding at June 30, 2024

$

Vested and expected to vest at June 30, 2024

$

Exercisable at June 30, 2024

$

At June 30, 2024, the intrinsic value of these stock options was $0 as the exercise price of these stock options were greater than the market price.

The following summary of restricted stock units’ activity for the six months ended June 30, 2024 is presented below:

Granted

Vested

Forfeited

Non-vested at June 30, 2024

As of December 31, 2023, the amount of unvested compensation related to issuances of restricted stock units’ fair value was $. This amount will be amortized and expensed over the life of the contract and will be included in selling, general and administrative expenses in the accompanying consolidation statements of operations.

As of June 30, 2024, the amount of unvested compensation related to issuances of restricted stock units’ fair value was $. This amount will be amortized and expensed over the life of the contract and will be included in selling, general and administrative expenses in the accompanying consolidation statements of operations. At June 30, 2024,

Average expected term (years)

years

Expected volatility

Expected dividend yield

Cost of Revenue

Long-lived Assets

Gain (Loss) Before Income Tax

()

Identifiable Assets

Depreciation and Amortization

()

As of June 30, 2023, the Company operated in two reportable segments (Corporate and Health Supplements) supported by a corporate group which conducts activities that are non-segment specific. The following table presents selected financial information about the Company’s reportable segments for the quarter ended June 30, 2023.

Cost of Revenue

Long-lived Assets

Gain (Loss) Before Income Tax

()

Identifiable Assets

Depreciation and Amortization

Currently, all of our customers are located in the United States of American and Canada. Our revenues to our customers are not material to our overall total sales. Our largest customers, Natural Grocers and Emerson Ecologics, LLC, account for less than 1% of our total sales in the months ending June 30, 2024 and 2023.

ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

Overview

We are a platform for acquiring, developing, patenting, marketing, and distributing plant-based nutraceuticals. Our products have not been evaluated by the FDA or any similar regulatory body for safety and efficacy. Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health. Our mission is to acquire or create products with health and performance benefits that have mass consumer appeal.

Guided by this mission, our first two acquisitions formed our current operating subsidiaries, BergaMet NA, LLC, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health. Based on published research from third-party sources, we believe our BergaMet NA, LLC products have been shown to support heart health, support immune response, and address metabolic syndrome.

Our Financial Condition and Going Concern Issues

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2023 and 2022 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. From inception (December 19, 2014) through the end of December 31, 2023, we have incurred accumulated net losses of $18,399,673. In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues.

If we are not able to do this, we may not be able to continue as an operating company. At our current revenue and burn rate, we have an immediate cash need, and thus we must raise capital by issuing debt or through the sale of our stock. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Introduction

We had revenues of $908,389 and $1,597,175 for the three and six months ended June 30, 2024, compared to $588,484 and $1,203,427 for the three and six months ended June 30, 2023. Our cost of revenue for the three and six months ended June 30, 2024 were $422,301 and $702,728, compared to $303,415 and $640,517 for the three and six months ended June 30, 2023.

Our operating expenses were $497,996 and $968,427 for the three and six months ended June 30, 2024, compared to $1,540,942 and $2,223,972 for the three and six months ended June 30, 2023. Our operating expenses consisted entirely of general and administrative expenses.

Our net income (loss) was $113,500 and $(747,758) for the three and six months ended June 30, 2024, compared to $(1,267,235) and $(1,846,392) for the three and six months ended June 30, 2023.

Revenues and Net Operating Loss

Our revenue, operating expenses, other income (expense), and net loss for the three and six months ended June 30, 2024 and 2023 were as follows:

		Three Months Ended		Three Months Ended		Six Monts Ended		Six Months Ended
		June 30,		June 30,		June 30,		June 30,
		2024		2023		2024		2023

Revenue	$	908,389	$	588,484	$	1,597,175	$	1,203,427

Cost of Revenue		422,301		303,415		702,728		640,517

Gross Profit		486,088		285,069		894,446		562,911

Operating expenses:
General and administrative		497,996		1,540,942		968,427		2,223,972
Total operating expenses		497,996		1,540,942		968,427		2,223,972

Other income (expense)
Interest expenses, net of interest income		(48,748)		(25,212)		(91,305)		(114,272)
Change in fair value on derivative		174,156		13,850		(582,472)		(71,058)
Gain on sale of asset		-		-		-		-
Total other income (expense)		125,408		(11,362)		(673,777)		(185,331)

Net income (loss)	$	113,500	$	(1,267,235)	$	(747,758	$	(1,846,392)

Revenues

We had revenues of $908,389 and $1,597,175 for the three and six months ended June 30, 2024, compared to $588,484 and $1,203,427 for the three and six months ended June 30, 2023, an increase of

$319,905, or 54%, and $393,748, or 33%, respectively. We expect strong growth to increase as our direct consumer sales and marketing efforts continue to perform.

Cost of Revenue

Our cost of revenue for the three and six months ended June 30, 2024 were $422,301 and $702,728, compared to $303,415 and $640,517 for the three and six months ended June 30, 2023, an increase of $118,886, or 39%, and $62,212, or 10%, respectively. Gross profit for the three and six months ended June 30, 2024 was $486,088 and $894,446, compared to $285,069 and $562,911 for the three and six months ended June, 30, 2023, an increase of $201,019, or 71%, and $331,536, or 59%, respectively.

Cost of revenue as a percentage of revenues was 46% and 44% for the three and six months ended June 30, 2024, compared to 52% and 53% for the three and six months ended June 30, 2023. The reduced cost as a percentage of revenues was due to efficiencies as a result of increased revenue.

General and Administrative

Our general and administrative expenses were $497,996 and $968,427 for the three and six months ended June 30, 2024, compared to $1,540,942 and $2,223,972 for the three and six months ended June 30, 2023, a decrease of $1,042,947, or 68%, and $1,255,545, or 56%, respectively. In the three months ended June 30, 2024, general and administrative expenses consisted mainly of advertising of $172,118, consulting fees of $94,500, stock-based compensation $74,854, salaries and wages of $51,476.88 and accounting and legal fees of $41,778.50. In the three months ended June 30, 2023, general and administrative expenses consisted mainly of consulting fees of $766,405, stock-based compensation $432,047, advertising of $168,148, accounting and legal fees of $30,883, and salary and wages of $36,813. During the three months ended June 30, 2023, part of the increase in costs were due to a catch up of stock compensation that occurred. Additionally, some of the incremental costs of the Company’s uplist have not been deferred and have been included.

Other Income (Expense)

Other income (expense) was $125,408 and $(673,777) for the three and six months ended June 30, 2024, compared to $(11,362) and $(185,331) for the three and six months ended June 30, 2023, an increase of $136,770, or 1,200%, and a decrease of 488,447, or 264%, respectively. In the six months ended June 30, 2024, other income (expense) consisted of interest expense, net of interest income $(91,305) and change in fair value on derivative of $(582,472). In the six months ended June 30, 2023, other income (expense) consisted of interest expenses, net of interest income of $(114,272) and change in fair value on derivative of $(71,058). In the three months ended June 30, 2024, other income (expense) consisted of interest expense, net of interest income ($48,748) and change in fair value on derivative of $174,156. In the three months ended June 30, 2023, other income (expense) consisted of interest expense, net of interest income of $(25,212) and change in fair value on derivative of $13,850. Change in fair value of derivative was related to the conversion of convertible debts into common stock shares.

Net Income (Loss)

Net income (loss) was $113,500 and $(747,758), or $0.04 and $(0.25) per share, for the three and six months ended June 30, 2024, compared to $(1,267,235) and $(1,846,392), or $(0.44) and $(0.64) per share, for the three and six months ended June 30, 2023.

Our net income (loss) varies from period to period primarily because of the change in fair value on derivative and our increase in general and administrative expenses.

Liquidity and Capital Resources

Introduction

During the three and six months ended June 30, 2024, we had positive operating cash flows. Our cash on hand as of December 31, 2023 was $19,441 and as of June 30, 2024 was $148,231. While we had positive net cash from operations for the three and six months ended June 30, 2024, our monthly cash flow burn rate for the year ended December 31, 2023 was $35,000. We have both short- and medium-term cash needs. We anticipate that these needs will be satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2024, and December 31, 2023, respectively, are as follows:

	June 30,		December 31,		Increase/
	2024		2023		(Decrease)

Cash	$	148,231	$	19,441	$	128,790
Total Current Assets	1,748,764			1,899,678	(150,914)
Total Assets	2,484,646			2,635,014	(150,368)
Total Current and Total Liabilities	2,084,646			1,680,424	404,222

Our total current assets and total assets decreased slightly during the six months ended June 30, 2024, primarily as a result of our decrease in inventory of $306,661, offset in part by an increase in cash of $128,790. Our accumulated deficit increased during the six months ended June 30, 2024, by $747,758 to $19,147,431.

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

Cash Requirements

Our cash on hand as of June 30, 2024 was $148,231. Based on our current level of revenues and monthly burn rate for 2023 of approximately $35,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

Sources and Uses of Cash

Operating Activities

We had net cash from operating activities of $187,809 for the six months ended June 30, 2024, compared to net cash used in operating activities of $(403,493) for the six months ended June 30, 2023. We use our cash for normal business operations. Our net cash from operating activities for the six months ended June 30, 2024, consisted of our net loss of $747,758, offset in part by our change in fair value on derivative liability of $582,472 and our decrease in inventory of $306,661. Our net cash used in operating activities for the six months ended June 30, 2023, consisted of our net loss of $1,846,392, offset in part by our warrants issued for services of $1,148,857, and increase in inventory of $354,503.

Investing Activities

We had zero cash flows provided by investing activities for the six months ended June 30, 2024 and 2023.

Financing Activities

Our net cash provided by financing activities for the six months ended June 30, 2024 was $(59,019), compared to $430,342 for the six months ended June 30, 2023. Our net cash provided by financing activities consisted of proceeds from the issuance of notes payable of $120,669 and proceeds from the issuance of notes payable related party of $95,000, offset by repayment of notes payable of $300,614.

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4Controls and Procedures

(a)Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2024, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well

conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

(b)Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three-month period ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1Legal Proceedings

There are no updates to the disclosure of legal proceedings in our Annual Report on Form 10-K.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 1ARisk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

On May 30, 2024 and May 7, 2024, we issued 4,166 and 25,500 shares of common stock for services rendered. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, and the shareholders were sophisticated.

Other than as set forth above, there have been no events which are required to be reported under this Item.

ITEM 3Defaults Upon Senior Securities

There have been no events which are required to be reported under this Item.

ITEM 4Mine Safety Disclosures

Not applicable.

ITEM 5Other Information

None.

ITEM 6Exhibits

(a)Exhibits

Exhibit No.	Description
3.1 (1)	Articles of Incorporation of Grey Cloak Tech Inc. filed December 19, 2014

3.2 (2)	Certificate of Amendment of Articles of Incorporation filed October 23, 2020

3.3 (3)	Certificate of Amendment of Articles of Incorporation filed December 19, 2023

3.3 (4)	Bylaws of Grey Cloak Tech Inc.

101.INS		XBRL Instance Document

101.SCH		XBRL Schema Document

101.CAL		XBRL Calculation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

101.LAB		XBRL Labels Linkbase Document

101.PRE		XBRL Presentation Linkbase Document

(1)	Incorporated by reference from our Registration Statement on Form S-1 filed with the Commission on August 28, 2023.

(2)	Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on August 3, 2021.

(3)	Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 29, 2023.

(4)	Incorporated by reference from our Registration Statement on Form S-1 filed with the Commission on March 6, 2015.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Healthy Extracts Inc.


Dated: August 14, 2024	/s/ Kevin “Duke” Pitts
	`By:`Kevin “Duke” Pitts
	`Its:`President

HEALTHY EXTRACTS INC. - Quarter Report: 2024 June (Form 10-Q)

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